What is the agreement between EU and Canada?

The Comprehensive economic and trade agreement – (CETA) is the biggest commercial agreement the EU was supposed to sign with a third country so far in its history. The deal removes 98% of all customs, opens doors for direct investments from both sides of the Atlantic and gives companies equal access to public procurements. The negotiations started in 2009 and although the final draft was completed in 2014, the EU is struggling to ratify it because of internal conflicts of interests and the alleged juridical complexity of the matter. In the last two decades Canada has developed into a European-style welfare state with high standards for consumer protection and tight environmental regulations – therefore most of the concerns regarding the other big transatlantic trade deal with the US (that the European consumer protection and environmental safety standards could be compromised) were not supposed to apply in this case. In this sense, CETA was thought of as a test or a pilot version of TTIP. Being the agreement deal to sign, CETA was supposed to improve the authority of the EU as a competent deal-maker and to give a push for the next agreement – TTIP.

Photo: Wikimedia Commons

Photo: Wikimedia Commons

Despite the protests of activists in Germany, the Netherlands and France, and the open disapproval of a couple of national and regional parliaments like those in Romania and Wallonia, until the beginning of June Jean-Claude Juncker was still confident that CETA will be ratified by the European Council and officially signed between the Commission and the Canadian delegation during Trudeau’s visit in October. “I couldn’t care less” – said Juncker about the strong opinions of some national parliaments, confident that signing trade deals with third countries is exclusive competence of the EU in the sense of the Treaties.

 

The “U” turn

In the end of June and the beginning of July the EU suffered two huge blows, which forced Juncker and the trade commissioner Cecilia Malström to come out with completely new statements. On the 7th of July in Strasbourg Malström said that CETA will be treated as an agreement of mixed competence and all national and regional parliaments in the EU will need to ratify it separately. This amounts to at least 38 chambers, any of which, even the parliament of Wallonia, could prevent the trade agreement that took 7 years of negotiations from taking effect. The two blows which led to this deviation were Brexit on one hand and the adverse position that the German and the French government took regarding the EU-exclusive ratification on the other. Brexit means that perhaps the biggest supporter of CETA, although still formally in Union, will be significantly marginalized as a player in Brussels. Meanwhile the French state secretary of trade Matthias Fekl and the German economy minister Sigmar Gabriel openly criticized Juncker for his intention to ratify the deal on supranational level and called this idea “foolish” and “unbelievable” and even used the whole Brexit situation to make the argument that because of the rising euroscepti it wouldn’t be wise of the Commission to act in such undemocratic way.

 

The basis for the ratification procedure

Democratic or not, Juncker’s intentions were completely in line with European law. According to the Treaty of the European Union, the common commercial policy falls exclusively within the competence of the Council, the Commission and the Parliament in the course of the so-called ordinary legislative procedure. There is no legally established procedure for ratification of such decisions by national parliaments (let alone regional ones). In fact, Malström mentioned this while speaking in Strasbourg – “We know that from a strictly legal viewpoint we have the exclusive competence to act, but we see what the situation in the Council is and we will release it as a mixed agreement in the interest of speedy ratification.” Of course, this is nonsense. First of all, it is clear that there is no way to secure ratification by nearly 40 chambers. This procedure is bound to fail. Even if it succeeds, which is highly unlikely, this is definitely not in the interest of a speedy ratification – the last time such mixed ratification was carried out, it took five years and it regarded the far less comprehensive and controversial agreement with South Korea. If such kind of procedure is considered quicker, this means only one thing – Germany and France have threatened to block the ratification in the Council. Therefore the ratification by the national parliaments is just a farce aimed at blaming the failure on the democratic process and not to Germany and France.

 

The internal lobbies in the European Council and their motivation

Clearly when the two biggest voters in the Council (the voting power depends on population) are against a certain motion, this motion will just not succeed. Germany and France have been subject to much criticism over the years, because of the way they’ve been dominating the Union by simply outnumbering the opposition. But most of the time their critics are referring to cases where the French-German duo has pushed forward legislation strengthening the integration, removing barriers and transferring sovereign powers to the European institutions. That’s why in this case one might find it surprising that France and Germany are sinking a project designed to bring integration to a new level that by now only existed on paper and which was supposed to advance the Commission’s role as a legitimate representative of Europe in the global economic relations. The explanation is both simple and painful. As the Union is becoming more centralized, Germany and France have great interest in removing internal borders, while keeping the external ones. Being the largest exporters of industrial and agricultural production and the largest providers of financial services, they simply don’t want to compete with American and Canadian companies on the single market which they have had for themselves in the last couple of decades.

On one hand there is the civil lobby, consisting of different green, red and patriotic activists who are concerned with how the trade agreements would affect consumer protection and environmental regulations, why are the negotiations kept in secret, how are the investors going to sue national states in those famous arbitration courts and other issues overstated and misrepresented by leftist media. They organize huge demonstrations and make petitions for referendums on CETA and TTIP. On the other hand, independently but by a suspiciously comfortable coincidence, there is the business lobby, consisting of all the big German and French companies who are flourishing on the huge but closed and tightly regulated European market and who obviously don’t want external competition. As the British conservative MEP with 17 years of experience in Brussels Daniel Hannan said during a Brexit debate in Oxford a couple of months ago – “Being elected as a conservative MP, I naively thought that big companies will want freedom of action, but that wasn’t the case. They loved regulation and lobbied in favor of it, because they could afford the compliance costs unlike their smaller or foreign competitors. They had captured the eurocratic machine and they were using it to build barriers for external competition.”

In the end of the day, the German and the French government cannot be blamed for protecting and advancing the interests of their citizens and corporations. But when the civil activists are being manipulated by leftist media suspected in connection with Moscow (where the failure of CETA and TTIP will be undoubtedly celebrated), when the current business interests are harming the long-term interests of the consumers and when on top of that, Germany and France hold around 30% of the voting power in the Council, then whole Europe has a problem.

 

The long-term implications for the EU

As Canada’s trade minister Chrystia Freeland put it in a provocative but quite proper way during her recent visit in Brussels – “If the EU can’t make a deal with Canada, then who the heck it can make a deal with?” Definitely, if and when the CETA fails, this will drastically lower the chances of TTIP to come true. Meanwhile the way Gabriel and Fekl forced Juncker to shift his position caused a huge blow for the international image of the Commission and proved the Brexiters to be right when accusing the EU of being a captive of the governments in Berlin and Paris. From now on, third countries will approach the Commission with reservation and will be reasonably concerned that European leaders might not have the actual authority to negotiate on the highest level.

The EU is facing a dangerous paradox – to remove more internal borders while drawing more external borders. The Union created to support free trade may become a fortress of protectionism and isolationism. This would mean slow and stumbling growth, increasing prices for the consumers and fewer innovations as the young and capable entrepreneurs will likely go and realize their ideas the US, Canada, Australia, South Korea, Singapore and etc.

 

By Toncho Kraevski

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